The headline numbers
For its second quarter 2016, the grocery-anchored shopping center REIT grew its revenue 27% year over year, to $58.7 million, and net income attributable to the company jumped 48.1% year over year, to $7.7 million, or $0.08 per share.
As I noted in my earnings preview earlier this week, however, a more useful metric to judge Retail Opportunity Investments' success is funds from operations (FFO), which effectively measures its cash flow from operations. Second-quarter FFO grew 36.8% year over year, to $30.5 million, and rose 17.4% on a per-share basis, to $0.27.
For perspective, analysts' consensus estimates called for Retail Opportunity Investments to achieve lower revenue of $57.6 million, and lower FFO of $0.26 per share.
Retail Opportunity Investments CEO Stuart Tanz said:
2016 is shaping up thus far to be an outstanding year for the company. We are fully on track to achieve and possibly exceed our key growth and operating objectives for the year. [...] While steadily growing our portfolio, we are at the same time enhancing our financial strength and flexibility. Thus far we have secured over $400 million of equity and debt capital, which we have lined up through a variety of sources, efficiently and seamlessly funding our growth, while also enhancing our conservative financial metrics.
More specifically regarding its capital markets activity, ROIC has raised roughly $224.2 million in common equity year to date, including $46.1 million raised in the form of operating partnership units in connection with acquisitions this past March, $45 million raised by issuing roughly 2.2 million shares of common stock through its ATM program, and $133.1 million raised by issuing 6.6 million shares of common stock through an underwritten public offering earlier this month. In each case, ROIC used the proceeds to reduce borrowings for acquisitions on its unsecured revolving credit facility.
On acquisitions and pricing power
Retail Opportunity Investments has committed a total of $289.4 million in grocery-anchored shopping center acquisitions so far this year, up from $155.2 million at the end of the first quarter.
In the second quarter, ROIC acquired two shopping centers for a total of $181.8 million, including:
- Bouquet Center, a 96%-leased, 149,000-square-foot property located in Santa Clarita, California, for $59 million.
- North Ranch Shopping Center, a 98.7%-leased, 147,000-square-foot property located in Westlake Village, California, for $122.8 million.
As of the end of the quarter, then, Retail Opportunity Investments' portfolio consisted of 77 shopping centers totaling roughly 9.1 million square feet, up from 64 shopping centers totaling 7.7 million square feet one year prior.
Subsequent to the end of the quarter, ROIC also acquired Monterey Center, a 100%-leased, 26,000-square-foot shopping center in Monterey, California, for $12.1 million. In addition, ROIC secured a binding contract to acquire Bridle Trails Shopping Center, a 100%-leased, 106,000-square-foot property in Kirkland, Washington, for $32.2 million.
All the while, Retail Opportunity Investments held steady its portfolio lease rate at 97.2%, marking its 10th straight quarter above 97%.
ROIC also delivered an 18.9% year-over-year increase in same-space comparative base rent. Of the 83 leases executed in the second quarter, Retail Opportunity Investments achieved a 24.7% increase in same-space comparative cash rent from 46 new leases totaling 76,006 square feet, as well as a 15.9% increase in base rent from 37 renewed leases totaling 75,056 square feet. Same-center net operating income increased 4.9% year over year, to $32.2 million.
Finally, Retail Opportunity Investments' board once again held steady its quarterly cash dividend at $0.18 per share.
Retail Opportunity Investments once again increased its full-year per-share FFO guidance, this time to a range of $1.03 to $1.07, up from its previous expected range of $1.02 to $1.06. Net income per share is also expected to be in the range of $0.38 to $0.39, up from previous guidance for net income per share of $0.33 to $0.34.
In the end, these better-than-expected results contained no big surprises. More than anything, they're indicative of Retail Opportunity Investments' steady strategy of expanding its real estate portfolio while maintaining responsible stewardship of its capital. Investors should be perfectly content holding their shares as ROIC's long-term growth story continues to unfold.